It was by no means easy. But, I had a plan, and I hit my goal, and it felt so great. And then I set another goal: automatic deposits into a Roth IRA. And I did that too, gaining more confidence and momentum. Step aside Katniss, I was a girl on fire.

But after awhile, the next steps became a little unclear. Was I supposed to learn more about investing? Should I look for ways to save more, or create additional income streams? I wasn’t sure. And since I had a lot of my savings on autopilot, I just let it ride. I didn’t set new goals. I wasn’t exactly irresponsible. I had a healthy savings account. I wasn’t making bad choices anymore.

But then I started getting lazy about other money habits too. I wasn’t checking my bank statements every month, and sometimes I’d find an error from three months prior. I didn’t draw up a detailed budget for our home renovation projects, which cost more than I’d anticipated.

I recently realized that I haven’t set a personal finance goal in almost two years.

And it’s not because I don’t need to! In fact, after buying a house in January, I really would like a bigger emergency fund — since houses have water heaters that break and old garage door openers that randomly decide to open, sometimes while you’re not home. (Luckily, we had a home warranty that the seller paid for, so these issues were covered.)

So basically, my lax money habits have gotta change. And because it’s the time of year when we all swear to save more money and lose 10 pounds and write that novel and save the dolphins, I’ve rounded up my top favorite methods for setting a goal and actually reaching it.

1. For all goals: Go specific or go home

Let’s take the “save more money” goal. What does that even mean? Save $5 more than you did last year? If you don’t get specific about a goal, you may as well forget the whole thing. As they say, obtainable goals are S.M.A.R.T.: specific, measurable, attainable, relevant, and time-bound.

Actually, the Internet disagrees about what each letter of the acronym stands for, but that’s not important here. What is important is that your goal to “save more money” morphs into something like “automatically deposit $100 more into my emergency fund each month for the next 12 months” — and that you write it down.

2. Also for all goals: Make failure an option

I recently joined a course called The Finisher’s Formula, led by Ramit Sethi of I Will Teach You To Be Rich. (Side note for the skeptical: I’ve done a couple of Ramit’s courses, but I’m not paid in any way to write about them, not in discounts or early access, and he’s never slipped me a Benjamin — pinkie swear. I’m just a fan.)

Anyway, Ramit says one of his best strategies for achieving goals is to plan for failure. “The fact is, you will fail,” says Ramit. “It will happen sometimes. The key is not to try to avoid failure all the time. It’s to actually build in a process to handle that inevitable failure.”

In other words, when you don’t plan for failure, you have one setback and give up, which looks a lot like this. But with a contingency plan in place, it’s more like this.

Here’s an example of a Plan B. Let’s say your goal is to have a money meeting with your spouse each month, but you know life gets hectic and the meeting might get cancelled. One contingency plan would be to immediately reschedule it for sometime in the next three days, and mark it on the calendar.

3. For savings goals: Use robots

Automation has been written about many times on this site and on other personal finance sites, but it’s a powerful tactic. Any money goal you automate is 687 percent more likely to be achieved.

Yes, I made that number up, but I still suspect it’s true.

4. For to-do-list goals: Harness the power of Google Calendar

You know you should shop around for car insurance every year, but you always forget until the renewal notice arrives in the mail. And at that point, it just seems easier to renew and shop around “later.”

For goals you don’t need to think about every day, use technology to set a recurring reminder. For instance, set an annual reminder to shop for insurance one month before you’re up for renewal. That way, you can shop around long before the renewal notice arrives.

5. For things you always say you should do (but never do): Give yourself a carrot

Let’s say your goal is to review your credit card statement every month on the 30th, but sometimes it just doesn’t happen (whoa, this sounds familiar). What are you missing?

A cue and a reward, according to Charles Duhigg, author of The Power of Habit: Why We Do What We Do In Life and Business. For instance, a cue might be an appointment every 30th at 5:30 p.m. that alerts you that it’s time to review your statements. And the reward could be a slice of yellow cake with chocolate frosting (yes, this one’s personal).

“You are pairing those in your brain,” says Ramit. “Saying, when I do this cue and therefore the behavior, I’m going to get this reward.”

I know this one will work. Any task is exciting if I get cake afterward. Another reason it works: When introducing a new habit, the most important thing is to get yourself to do it consistently. “Do that, and your attitude will follow,” he says. “In fact, you may not even need [the reward] a month down the line.”

6. For getting rid of bad habits: Introduce an incompatible one

Maybe your goal is to spend a certain amount on groceries each month, but you often go over your budget. One way to achieve this goal is to create an incompatible behavior, which is a new behavior that makes it impossible to do the old behavior.

For instance, if you overspend at the grocery store, you could switch to the envelope system. Now you can’t overspend because you only have a certain amount of cash in your “grocery” envelope. Overspending and paying with a set amount of cash are incompatible behaviors.

7. When you want an extra push: Don’t hold yourself accountable

If at first you don’t succeed, destroy all evidence that you tried. That’s always been my motto. And that’s why I can’t hold myself accountable to reach my goals. I need the pressure of public failure.

So if your goal is to start a side business, tell a trusted friend or mentor that you want to close one customer in the next month, and that you want them to hold you accountable.

If you’re really serious, bet them $100 that you can do it. No one likes to lose a bet.

8. For sticking to the plan: Track your awesomeness

For the last three months, I’ve been tracking my strength training workouts. It’s pretty cool to see that I’ve dropped 25 pounds on the chin-up assist machine. (Oh, and I can do unassisted chin-ups now! I think that deserves some cake…)

For most money goals, tracking progress is super easy with money management software. You can play with charts and graphs to your heart’s content, then pat yourself on the back for hitting your savings goal or staying within your budget. Or, go old-school and use Excel.

However you decide to do it, keep a record of your progress so you’ll have positive reinforcement to keep doing what you’re doing.

Okay, Readers, we all make our ca-razy New Year’s resolutions, but how do you plan to reach yours? And by the way, welcome to 2014!

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I have set a goal of depositing $200 in my Savings account every month and my friendly bank is kind enough to trigger an automatic transfer from my normal access account to my savings account at the mid of each month. The idea is to slowly forget about this automatic transfer, as if this is not happening at all. I then set up a savings goal of an additional $100 each month from the left-over disposable income I have – this helps me reach my savings goal faster!

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Kalen @MoneyMiniBlog

Use robots! I love it. Automation is one of the great wonders of this century. Not only can you use automation for saving, but now you can do a lot of auto-investing. I use auto-pay plans for mutual funds through USAA and of course my TSP is automatically drafted.

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Alan

Hi April,

I’m glad you said ‘resolutions’ and not New Year’s resolutions here – 1. because this is good advice for any kind of resolutons, not just this time of year and 2. we should be challenging ourselves, testing, experimenting, setting goals, whatever you want to call it (e.g. ‘resolutions’) all year round – not just at new years.

There are different schools of thought on 7 by the way – some recent research has shown that if you state your goals publicly, you become less motivated to do the work needed to achieve them (because having stated the goals, the way your mind works is that in some ways it feels like they have already been achieved – or at least are closer to being achieved than if you hadn’t publicly stated them at all).

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Michelle

Great article, April! I love that you shared Ramit’s ideas on planning for failure. I’m also a student of his and I’m working on a different course where he offers a corollary to that: the Silicon Valley idea of failing quickly. In other words, keep a check on your progress and be realistic when things aren’t going your way. If you can tweak your approach to meet your goal, then great. But if the only option is to pull the plug, just recognize that and get it over with rather than slaving away towards a goal you know you won’t meet. Better than wasting time, energy, and resources that you could use to rethink and try again.

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The Caveman

Great energy, April! I love the enthusiasm!

I back you up wholeheartedly on automation. I have automated transfers from my checking account to my various savings accounts and my Roth that take place on the very day I get paid. Paycheck goes in, transfers go out. Same day.

Not only is it effective, but it just feels good to set those transfers up, knowing that you are pre-planning your saving habits. It also helps put some emotion into your financial decisions. If you want to stray from your savings plans, you have to physically log onto your bank’s website and make the conscious decision to stop your transfers. That’s hard to do.

Great write-up. Keep ’em coming!

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MoneyAhoy

I really like the first and the last point. When I’ve developed SMART goals I’m always much more inclined to succeed. Also, setting up a personal accountability (through a third party) does wonders to motivate you! Great tips!!!

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Sam

Track, track and track. I’m a gal that tracks her NY’s resolutions by using a simple chart from Gretchen Rubin – author of The Happiness Project. It simply a chart for 31 days with the goals across the top. Now not all my goals are daily goals, but I still use this chart to track. I carry it around with me, its normally in my work bag, by the end of the month its a crumpled mess. I’ve tried some of the iPad to do list apps, even paid for one, but I find paper and pen and chart to work best for me.

When it comes to financial goals, I track, track, track too. I’ve got our savings goals that I track each year, I update that chart 2-3 times a month (of course Mr. Sam needs to make me my chart for 2014). I did the same when we were killing debt in 2007. We also download our account statements, and since we use debit cards primarily, into Quicken which is another form of tracking.

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Stefanie @ The Broke and Beautiful Life

The most beneficial strategy for me in keeping my resolutions has been to break down the goals into next steps/immediate actions. Rather than lose weight, I’ll mark which days in my calendar I’m going to run and which days I’m going to yoga.

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Kandace

Caption on the video is not correct. Edvard Munch’s “The Scream” was painted long before moving pictures came along. Not sure when it was painted, but probably 1890 or so.

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Allyson

That irked me too.

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Skint in the City

I’d add another hack: Consider the Alternative.
For me, saving’s just GOT to work, because an old age in penury isn’t an option. If I can’t be bothered doing something I remind myself what the long-term effect of NOT doing it is – best motivator I’ve found . . .

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Laura

This is the first year ever that I’ve set New Year’s Goals/resolutions and, 2 weeks in, am still on target. What I did differently this time: instead of making my goal “lose weight” or “pay off debt,” I broke down what I needed to do towards those goals – and then made a few of THOSE my New Year’s Goals. So this year, I have goals to exercise 30+ minutes/day and cut out sweets (no cake for a reward here), and to stick to a budget (that includes paying down debt) and avoid new credit card debt (I can’t say “don’t use the card” due to some necessary internet purchases). So far, I’ve kept those goals. If I continue them, I will likely lose weight and likely pay down my credit cards. But if I don’t, I have still accomplished my 2014 goals – to exercise regularly, eat a bit better, and delay purchases if they’re not in the budget. It’s more in my control, thus I’m more encouraged to continue the work because success is much more likely to occur.

I do what I can control. That makes it much more likely that I’ll succeed.

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Becky @ RunFunDone

One thing I’m doing this year to help me reach goals that are difficult is having monthly challenges. For example, I would like to try couponing, but it seems kind of overwhelming. Instead of trying to coupon for a whole year, I’m just dedicating one month to testing out if couponing is for me.

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phoenix1920

LOVE LOVE LOVE this post!! Planning for failure is eye-opening for me! I can see exactly why this is would really help. Thanks

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Todd in VA

Great post. Per the advice above, I have a question that has been bugging me about how best to allocate money into different savings ‘piggy-banks’ for future ‘wants’ and then follow through and actually use that money as intended.

First, I wanted to thank you for the time and energy you put into your posts. They have been some of the best tools I have come across in life. My whole ‘commercialized’ understanding of investing and saving was turned upside-down after reading these blogs on passive income/retiring early and I owe you many thanks.

My question is – how does one separately save for future purchases (‘wants’) (ie a new auto, vacation, toys, etc) without those savings eventually assimilating into your total retirement ‘picture’? In the past I have set up a tertiary trading account in the hopes I would use that money for a new auto one day but with the earnings from dividends and increased value in the stock, I find I cant bring myself to sell any of the stock! It has now become part of my overall financial picture and is no longer set aside for purchase of a vehicle. I could drip the money into separate savings accounts or the mattress – but they just don’t pay anything.
I want to trickle money into three or four account ‘piggy-banks’ but I know I will start to lump them into my total savings picture when they become aggregated in my spreadsheets or the Personal Capital app. I will find that I wont touch these accounts since they are 1. no longer liquid 2. accumulating dividends and 3. would reduce my net worth.
Thanks to you and other bloggers, I am doing the right things financially and plan to retire early as I am saving upwards of around 48% of my salary. I can easily set up some savings or investment accounts which I would automatically drip funds to each month for those long-term ‘wants’ – but it’s a problem when it comes to time for me to withdraw funds when I hit my goals.

Any suggestions for saving into multiple accounts that do not create such cognitive dissonance when it comes time to reap the rewards?

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El Nerdo

I disagree with S.M.A.R.T. goals for changing behavior. They lack emotion, they don’t tell you where you’re going, they don’t alter your mindset or bind with your identity, they don’t trigger action or harness the power of groups.

I’m mentioning this now because I’ve seen them mentioned in a series of articles here lately– Honey mentioned them after New Year and I think Kristin did too I think. So it’s like one of those truisms that people are starting to take for granted. “Goals need to be S.M.A.R.T. goals.” And people say “yes, yes” because it’s the conventional wisdom.

S.M.A.R.T. goals, for all their clarity and objectivity, are for people who don’t need them– they do little or nothing to change behavior. They are great for tracking what you’re doing when you’re already doing the right thing, but when you want to break out of a rut you need different tools.

The rider/elephant/path that the Heath brothers worked out its much better and comprehensive in that regard. It harnesses rationality, emotion and environment for long lasting change. S.M.A.R.T. goals only deal with the rational part and ignore the rest, and we know that motivation and action and commitment require much more than rational clarity.

I mean, some times you need a CRAZY goal to inspire you. The debt snowball, for example, is not based on SMART goals. The debt snowball is more like the rider/elephant/path model in that it takes on a seemingly unattainable task by harnessing the power of emotion and by simplifying the actions needed and by changing your environment to help your goals.

If you set something like “pay $100 over the minimum balance every month” (specific, measurable, attainable, time-bound) you’d die of boredom before you pay off your crushing debt. The debt snowball is relevant, yes, but it works works in spite of lacking specifics (you pay what you can), it tackles the apparently unattainable (crushing debt), and is open-ended (you don’t know when you’ll end when you start).

Yet the debt snowball works, because it appeals to the emotions and your identity (instead of math) and it prevents you getting lost on overanalyzing. It asks for a simple relevant action like a SMART goal, but it builds and is powered by much more than that– it’s powered by huge, crazy, life altering goals, it’s powered by identity, and by success building upon success.

Same thing with second stage I believe. “Save X per month” is boring. “Retired by 40!” is a lot more fun and powerful and motivating.

Anyway, this is getting long, and maybe I’m right or maybe I’m wrong but at least I hope the subject is now open for discussion.

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Sarah

I agree, El Nerdo. I have put in place SMART goals, and I have not always been successful in carrying out the actions and the tracking of failure then becomes a chore and depressing. In those experiences I have used another tool I learned from implementing Quality Management Systems for my former employer. The five why’s. Why didn’t the plan work — and you can never blame the person or in this case yourself, and you keep digging deeper into why the goal wasn’t accomplished. I have sometimes discovered more about myself and determined that some goals weren’t really right for me. There were actually better and stronger prioritizing superseding my ostensible SMART program. Sometimes failure to achieve a goal I see as my subconscious alerting me there is something more important to be done.
Wow — I hope that doesn’t sound too weird, but it works for me when SMART fails to see what’s really going on inside.

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El Nerdo

I’m not familiar with that methodology, but sounds pretty great and not weird at all– a questioning of whether your unmet goals aligned with your values, systems, resources, vision, etc.

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Kristin Wong

Interesting point, El Nerdo! I have to say, when it comes to lifestyle changes or ingrained habits, I haven’t had much luck using ONLY ‘smart’ goals. I still think they help, but I see what you’re saying. You need a goal that appeals to your mindset, changing your perspective. For me, using specific goals in tandem with something like that has helped. The debt snowball might be a crazy method, but when figuring out how I was going to go about it, I definitely also used specific, measureable and time-bound goals.

On a similar note, I read a study (‘Saving in Cycles’) that found people save more when they think cyclically and don’t focus on a specific future goal. The reasoning is that, when people develop a cyclical mindset, they’re more focused on what they can do now, rather than the unknown possibilities of the future. So when you blend your future self with your present self, you develop better savings habits. Anyway, I thought that was pretty interesting, too!

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El Nerdo

Yeah, sustained motivation and big achievements take a lot more than small “reasonable” goals. The Cycle thing seems to point at the power of habit rather than a linear rush towards an objective (which we dont know how it was set or why) and I’ll agree with that in principle. The big question then is how to establish such unbreakable habits, and for that I’ll return to what made me post the comment in the first place.

I’d like to wholeheartedly and with my best wishes encourage you and all GRS denizens to read and re-read “Switch” by Chip and Dan Heath. I posted a review of that (mixed with GTD, I think), on last year’s new year– not a day for much traffic, but eh, it’s there. I’m not recommending this book because I wrote about it, I’m recommending it because for me it has been a great and deep and important book, and it’s made a huge difference in my life– so this is for you or others who are wanting to make big changes and keep that way.

2013 was one of transformations for us, and even though I sit today looking at my projects (building a new house, killing the paperwork dragon) and it feels like a vast empty plain of unfinished things (because I’m always starting new projects), I look back a year and I realize that my family was in a very different place twelve months ago, and projects got finished, and changes have been tremendous. So I’ll solemnly swear by it, and all. Please check it out!

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Beth

No one strategy is going to work for everyone — it really depends on personality and motivation.

I want to trim my grocery budget this year. Right now, the thoughts of using SMART just exhaust me. (My life is already full of spreadsheets as it is!) I liked the envelop method suggested in this post because I can start right now and I don’t have to over-think it.

I am curious about the comments about cyclic saving. I’m really good at the “save x amount each month”, but I wonder if I could push myself to do more if I change my strategies?

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Brian@ Debt Discipline

I like to be as detailed as possible when setting goals. If a set a goal just to lose weight in the new year there no good way to measure my progress, but if I say I want to lose 10 pounds by March I have a better way of tracking my progress.

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Tina in NJ

Great post, April. I liked the substance of it, but I really liked your “voice.” Your personality really came through, which isn’t always the case in nonfiction writing. (This is something J.D. mentioned over on More than Money recently.) Now, about that cake…

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Dave @ The New York Budget

I love the idea: “make failure an option” – it happens too often – our goals are derailed because we weren’t perfect in executing them. Almost perfect is still WAY better than just giving up.

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Nick

Excellent Post April. SMART targets are definitely the way to go. I make all my targets specific so I know exactly what I’m doing. Thanks for sharing.

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FI Pilgrim

Having a calendar that you trust and that will REALLY remind you of things an important part of goal setting, in my opinion. If you don’t have one you won’t have reminders to take the next small step, and will find yourself still at step one when you wanted to have your goal completed.

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Beth

I especially like the point about planning for failure! Or rather, preparing for problems that might arise.

For example, I drive an older car so I keep money aside for repairs. I know a good mechanic, and I have CAA in case I get need roadside assistance. It’s still a bit of a hassle, but I’m able to deal with an unexpected repair without it derailing my financial goals.

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Fredrik von Oberhausen

Why do you think that you fell back into normal habits again after you had been doing so well for a while?

I think it is important to realise the reason for why that happened to be able to change ones own behaviour for the long run.

Yes, you can try to force the behaviour by carrots etc. but I am certain it will not last in the long run. Simply put a bigger conviction must appear or an epiphany is needed to make long term radical changes.

$10,000 USD for an emergency fund is a lot! Well done saving it together but it is a lot of cash having sitting around! I hope you placed it in something high yielding.

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phoenix1920

Putting $10K in a high yield account could defeat the very purpose of an emergency fund. i.e., the economy tanks (and investments go down) so down you are worried about your job, but your emergency fund that was in a high yield investment is toast. If you have money in a high yield investment, it is called an investment–not an emergency fund.

And while a $10K emergency fund is great,since it is supposed to cover 3-6 months of expense, I don’t think $10K is necessarily a lot. That would fund my house payment for 6 months, but nothing else.

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El Nerdo

Agreed. EF needs to be in an FDIC-insured account, like a money market. (Though some might prefer a pot of gold buried in the backyard, ha ha.)

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imelda

I don’t know, I feel like an emergency fund can tolerate a bit of risk. Say, if there were a better market for CDs, keeping a portion of it there. Or even a conservative mutual fund.

It’s a *lot* of money to have just sitting around earning 0.015% interest from a “high-yield” savings account. If you lose your job, you have plenty of time to cash out whatever you’re invested in. It’s not likely you’ll need *all* that money at once, is it?

Yes, if the whole world goes to hell, you’re screwed, but that’s a given anyway.

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El Nerdo

Well, not really. I have relatives, and we have cattle–so we can endure a bit of zombie apocalypse (at least till the zombies eat the cattle). But for the cash proper, I’d rather get +0.9% no-fee MM at Ally than having to go into -16% for debt in case of personal (not global) catastrophe– or monthly cash outlays to insurance, and that sort of thing. It’s all about risk management, and self-insurance is statistically cheaper (otherwise insurance companies couldn’t profit). The low interest is counterbalanced by the low risk. EF is meant to make you safe, not rich.

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Justin @ Decisive Dollar

Great post, April!

I agree with all of your points, but I especially like #8. I’ve found that no matter what my goal is, I am ALWAYS more successful when I am tracking my progress. With all of the apps available for smartphones, you can literally track anything.

Besides using Mint for my money, I also use a step tracking app to count the number of steps I take in a day. The goal is 10,000/day, which is pretty tough for me to reach. But it’s making me conscious of the fact that I need to move around much more often to stay in good health.

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Ursala @ Diamond-Cut Life

We agree Justin (and thanks for a great post, April). Choosing a tracking tool that fits your lifestyle and flow is important. We are all about follow-through over the long term at Diamond-Cut Life. I have one friend who prefers a written calendar and tracks her resolutions with symbols on the month layout section of the calendar. It’s about ease of use so that you will stay with it over time.

Seeing how you are doing can help you know whether to slow down or speed up, reset or gain momentum.

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